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 Tax Benefits

The three major tax benefits of Opportunity Zones:

  1. Defer: Capital gain deferral if the funds were reinvested in a Qualified Opportunity Fund - the original gain can be deferred until the earlier of the Qualified Opportunity Fund being sold or 12/31/2026.
  2. Reduce: Capital gains can be partially recognized if they are held for a period of more than 5, but less than 10 years.
    1. Opportunity Fund is held less than 5 years – the full amount of gain is recognized.
    2. Opportunity Fund is held 5-7 years – 90% of the capital gain is recognized.
    3. Opportunity Fund is held for 7-10 years – 85% of the capital gain is recognized.
  3. Eliminate: Elimination of capital gains if an opportunity fund is held for at least 10 years

 Who Is Eligible

Partnerships and Corporations are eligible to execute the tax advantages of section 1400Z

If a partnership or S Corporation meet all requirements of section 1400Z and elects to be treated as a Qualified Opportunity Fund, but does not elect to defer the gain at the entity level, the owners may still be able to elect to execute the tax advantages at the individual level.

 Who Should Consider

  • Those with significant gains that will be recognized upon the sale of non-Opportunity Zone Property. The funds can be reinvested in an Opportunity Fund within 180 days and the gains can temporarily be deferred.
  • Those considering the purchase of a new or existing business real estate or stock.
  • Those considering significant improvements to property located inside a qualified opportunity zone.

 Automatic Election

The self-certification is completed via Form 8996 which must be filed with the tax return by the due date, including applicable extension, to certify that the entity was organized as a Qualified Opportunity Fund.

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